Jobs and millions of rands lost – Here's how Temu and Shein are hurting SA

The Citizen

a day ago

More than 34 000 jobs could be displaced by 2030 if Shein and Temu continue to gain market share.
Most people are always looking to buy clothes at a cheaper price, and this is no different when it comes to South Africans. Offshore e-commerce platforms, particularly the two Chinese online stores Shein and Temu, are excelling in offering affordable clothing to people. However, this has negative effects on SA's economy and the clothing sector.
A report released on Tuesday by the Localisation Support Fund (LSF) highlights that the growth of offshore e-commerce retailers in the country has resulted in millions of rands in sales and thousands of jobs being lost in local manufacturing.
According to the report, Shein and Temu have collectively achieved approximately R7.3 billion in sales, resulting in an estimated R960 million in lost local manufacturing sales, 2 818 manufacturing jobs that may have materialised, and 5 282 unmaterialised retail jobs from 2020 to 2024.
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Decline in clothing sales
The Retail-Clothing, Textile, Footwear and Leather (R-CTFL) sector has reported a decline in sales from R117 billion in 2011 to R105 billion in 2024. Focusing on online stores in the country, the report outlined two scenarios that could have resulted in the decline.
The first scenario is that there has been a decline in the volume of units sold in the country's retial and clothing market since 2011. The second scenario is that there has been a shift to less expensive clothing due to the high cost of living.
The second scenario is more likely as the report highlights that the presence of e-commerce platforms in the country increased between 2015 and 2024. 'In 2015, R-CTFL e-commerce accounted for 2.4% of the total R-CTFL market (R3.5bn) and has increased to 9.9% (R20.1 bn) in 2024.'
The findings are supported by figures of The Foschini Group (TFG), Mr Price (MRP), Truworths, and Woolworths.
Online shopping growing
There could be a number of reasons why online shopping in the country has increased.
The report attributes the growth of online shopping to internet availability, improved online payment security and associated consumer trust levels, increased smartphone adoption, improved logistics and last-mile fulfilment, and improved online offerings from retailers operating in SA.
Online shopping in the country is expected to grow, with sales projected to reach 15.9% by 2030.
'Fieldwork conducted through retailer interviews indicated a strong consensus that the growth of e-commerce will be underpinned by South Africans having easier access to online shopping marketplaces through digitalisation, high smartphone adoption, and increased cashless nature of the South African economy.'
Why people love Shein
Moving to one of the biggest threats to the country's retail sector, the report outlines that the growth of Shein and Temu is underpinned by their mastery of speed, flexibility and cost management.
Shein's strategic supplier network consists of two types of designers: Free on Board (FOB) designers (about 500) and original designers (estimated between 20 000 and 30 000), all operating under Shein's supplier management system.
'Interestingly, unlike other retailers who shy away from markdowns of more than 50%, Shein has a very aggressive stock clearance approach, discounting poor clearance items by up to 90%,' reads the report.
More than 34 000 clothing retail and manufacturing jobs could be displaced by 2030 if offshore e-commerce platforms like Shein and Temu continue to gain market share.
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Temu offers lowest possible prices
The report also notes that Temu's supplier network consists of low-cost manufacturers. The Chinese platform facilitates supplier competition, where suppliers compete for orders in bidding wars, with the lowest price winning the contract.
'This constant price competition ensures that Temu can continuously offer the lowest possible prices across its platform.
'Suppliers deliver selected goods to Temu's warehouses, where Temu handles logistics, customer service, after-sales support, and marketing, allowing manufacturers to focus purely on production without additional operational burdens, creating higher levels of price competitiveness.'
Temu's delivery system
The report highlights that Temu's logistics strategy is built around cost efficiency, using shipping methods to reduce expenses and maintain low consumer prices.
'Temu buys airline cargo space at discounted rates once a plane has already broken even, securing cheaper freight costs. The company combines heavy and lightweight goods in shipments to fully utilise cargo capacity, further reducing costs.
'Then orders are shipped directly from warehouses in China to consumers via sorting centres, allowing bypassing of certain tariffs.'
Support needed
'The report also highlights lessons for local retailers and manufacturers. Shein and Temu have succeeded not only because of regulatory loopholes but through their highly digitised, data-driven supply chains and investment in supplier performance.
'With the right support, South African firms could leverage similar approaches to build more agile value chains, capable of competing globally.'
Smash-and-grab economics
Commenting on the findings of the report Simon Eppel, Director of Research at the SA Clothing and Textile Workers' Union (SACTWU) said, 'The surge in the market of cheap goods from these e-commerce offshore platforms is depressing the prices that local retailers can charge.
'This is smash-and-grab economics, an easy way to come into a country, grab what they can, and leave all the costs to us. The report shows that clearly and what is really worrying is the broader impact this will have.
'These offshore operations are causing real distress to competition, to the economy and to jobs. If we cannot succeed in mitigating the risk, then we should have banning these apps as an option.'
Tax on Temu and Shein
The removal of low-value parcel relief by the South African Revenue Service (Sars) in 2024 was seen as a positive step in saving jobs in the sector.
Imports under R500 are now subject to the standard 45% customs duty and VAT, aligning them with other clothing imports. Eustace Mashimbye, CEO of Proudly SA, stated that they have driven the message of localisation and urged consumers to double down on procuring goods and services locally.
'To that end, we have launched an online store that provides consumers with much-needed accessibility to locally manufactured goods.'
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